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4.1. SR 03-23-1998ity of Item 4.1. MEMORANDUM River DATE: SUBJECT: Mayor & City Council Paul T. Steinman, Director of Economic Development March 23, 1998 Development Account Guidelines Issue At a meeting on February 2, 1998, the City Council discussed a draft copy of proposed Development Account Guidelines. Staff incorporated comments from that discussion into the attached Guidelines and will be recommending approval of such Guidelines by the City Council at this meeting. Background A Development Account is a significant and necessary financing source for various economic development projects. Development requires a great deal of "working capital" to facilitate projects and programs undertaken in this department. It also takes a significant amount of time before the EDA can recoup dollars which are invested into a project. For example, to pre-fund a tax increment deal means that in some cases the EDA will not recoup its dollars for an approximately 9 to 25 year period. This makes it necessary to have an even greater supply of working capital dollars in an account for development activities. The purpose of the Development Account Guidelines are to help the EDA and Council guide the use of the Development Account in a manner which supports the growth of industry and employment in the City of Elk River. The Development Account Guidelines outline various possible uses for Development Account dollars and also various methods of capitalization of the Development Account. The primary purpose of the Guidelines is to assure the City Council that the Development Account is only used for development purposes which meet the test of job growth and increasing the city's tax base. A final signifiCant issue for the Council to address is the manner of control of the Development Account. It is agreed that the most appropriate manner of final control of the Development Account is through the City Council. 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 However, since Development Account funds are proposed to be used specifically for Development Account activities, it is appropriate also to approve a process which will involve the Council receiving recommendations on the use of the Development Account from the Economic Development Authority. Recommendation Staff recommends the City Council approve and adopt the Development Account Guidelines as proposed. Attachments · Development Account Guidelines \\elkriver\sys\shrdoc\council\daguide.doc CITY OF ELK RIVER DEVELOPMENT AC COUNT GUIDELINES L IL Purpose: The City of Elk River ("City") has established a Development Account to assist in providing a source of funding to be used to foster and promote development and redevelopment activities within the City of Elk River. The Development Account is a revolving fund established by the City Council and administered through recommendations by the Elk River Economic Development Authority ("Authority"). The City Council shall review recommendations from the Authority on modifications of these guidelines and applications for use of funds. The Development Account is intended to provide an ongoing source of funding to be used to reduce the need for, or extend the long-term debt issued in connection with, the City's economic development activities. The Development Account also serves as a centralized funding source to provide financial overview and control in connection with assisted projects and programs. The purpose of these Guidelines is to set forth in general terms requirements regarding the funding of the Development Account and its use as an economic development tool. Funding of Development Account: The source of funds used to create and to maintain the Development Account consists generally of the proceeds from the repayment of loans made from the Development Account, other project revenues including payments received from the sale of real and personal property, recycled federal and state grants, and other funds as designated from time to time by the City or recommended to the City by the Board of Commissions of the Authority. In particular, the following sources may be used to fund and maintain the Development Account. A. Interest earnings on various projects and program accounts; Proceeds from the sale or resale of real and personal property in connection with development and redevelopment projects; Co Income derived from the repayment of loans and grants under various county, state, and federal loan and grant programs, including the Federal Economic Development Grant Program and the Federal Community Development Block Grant Program; D. Fees derived from the sale of bonds for private development; E. Annual tax levy. III. IV. F. Administrative fees from Tax Increment Districts. Other funds may from time to time be directed to be placed in the Development Account by action of the City and/or Authority. The City Administrator and Authority's Executive Director shall take all actions necessary to sustain and maintain the balance in the Development Account. Use of Development Account As a matter of policy, the Development Account will only be used to assist proposed projects which meet one or more of the following objectives. ho To increase the tax base of the city in order to ensure the long-term ability of the city to provide adequate services for its residents while lessening the reliance on residential property tax. Bo To retain local jobs, increase the local job base, and provide diversity in that job base. Co To increase the local industrial market potential of the City of Elk River. Do To induce development in the industrial/business park areas of the city in order to encourage high levels of property maintenance and private reinvestment in those areas. To accelerate the industrial development process and to achieve development on sites which would not be developed without this assistance. Fo To redevelop blighted or underutilized areas of the community into viable commercial and/or industrial uses. Go To encourage additional unsubsidized private industrial/business park development or redevelopment in the area either directly or through secondary "spin-off' development. To offset extraordinary costs of industrial/business park development/redevelopment over and above those which a developer might incur in typical market driven urban and suburban development. Additional Guidelines The following guidehnes will be adhered to with regard to the use of funds from the Development Account. ho The types of uses of the Development Account will include, but not be bruited to, the following: (i) the making of loans at interest rates below or at market rates of interest in order to strengthen the financial feasibility of proposed projects; (ii) the guaranteeing of loans; ('fii) to provide "up front" dollars to projects for qualified business growth and expansion; (iv) the provision of secondary or gap financing for specific projects; (v) the financing of land acquisition and disposition and the construction of public improvements and utilities to aid proposed projects; (vt') the administration of economic development programs; and (vi) any other uses as permitted by applicable law. Bo To the extent possible, funds from the Development Account will be allocated to a diverse number of projects and programs, thereby reducing the risk that funds to be repaid will not be available for future use. Co The Development Account may be used to provide short-term financing of the public cost of particular projects so as to allow the sale of bonds which in turn will provide long-term financing of such costs at a time and rate most economically beneficial to the City. Do All funds from the Development Account will be adequately secured by liens, tax increment, letters of credit, and/or other appropriate forms of security. Eo Every attempt will be made to ensure that all funds from the Development Account will be repaid with interest at interest rates which will be established on a project by project basis by the City, upon recommendation of the Authority.